Another lurking debt bomb: federal pensions

The pension program for members of Congress may not be as generous as many public pensions, and it may amount to a mere drop in the bucket in terms of total federal spending, but Rep. Mike Coffman insists its very existence undermines congressional credibility in addressing retirement programs that truly are a threat to national solvency.

“We’re going to have to make some difficult decisions regarding benefits for federal workers and the military and Social Security,” the Republican told me. “I think we’d have more credibility if we did away with our defined benefit plan,” while allowing members to continue to participate in a “thrift savings program” similar to a 401(k).

As if to underline Coffman’s point about the urgent need to address other retirement benefits, USA Today has published an article that concludes “retirement programs for former federal workers — civilian and military — are growing so fast they now face a multitrillion-dollar shortfall nearly as big as Social Security’s.”

Even more disturbing, “The federal government hasn’t set aside money or created a revenue source similar to Social Security’s payroll tax to help pay for the benefits, so the retirement costs must be paid every year through taxes and borrowing.”

Read the entire article for an appreciation of why Congress must get serious – and soon – about slowing the growth of pensions.

I don’t know if Vince Carrol is relying on the USA article, which was inaccurate, or he just doesn’t know the Federal retirement system. So I will explain it to him so he can get his facts right.

First the Social Security system. The employee pays 4.2% of his/her first $106,000 and the employer pays 6.2% of the same limitation in the form of payroll taxes. The Federal employee pays 7% of their entire salary and an additional 3.4% for Medicare. Therefore both systems pay 10.4% toward their respective systems, however difference is the Federal employee pays both the employee and the employer share, and is not salary limited. So, the Government does have a revenue stream for Federal pensions contrary to exertion made by the USA Today and Mr Carroll.

The Federal Employees retirement account, like Social Security, has had their accounts siphoned away by the Adminisration and balances replaced by “IOU’s” backed by the “full faith and support of the Federal Government”. It was reported that the Federal Employees fund was drained by President Bill Clinton to keep his spending under the spending cap imposed at that time. Prior to that time the fund was solvent and able to handle the demands.

Vincent Carroll is The Denver Post's editorial page editor. He has been writing commentary on politics and public policy in Colorado since 1982 and was originally with the Rocky Mountain News, where he was also editor of the editorial pages until that newspaper gave up the ghost in 2009.

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